HOUSTON (Reuters) – Oil prices slipped 1.5 percent on Monday, pressured by a strengthening dollar and rising U.S. crude output, but prices remained on track for the biggest January increase in five years.
Brent crude futures were down $1.05 at $69.45 a barrel at 11:26 EST (1626 GMT). U.S. West Texas Intermediate (WTI) crude futures were $1 lower at $65.14 a barrel.
Brent has risen 6.3 percent so far this month, headed for its biggest January rise since 2013.
“There seems to be a little profit-taking today because the stock market is weaker and longs keep adding to the long side of the equation,” said Phil Flynn, analyst at Price Futures Group in Chicago.
Oil prices have been buoyed by the U.S. dollar’s six straight weekly slides. The greenback is set to fall 3 percent for this month. .DXY Oil is priced in the U.S. currency, so a falling dollar can boost demand for crude from buyers using other currencies.
The dollar index had been below $90 since Jan. 24. But the currency has rebounded nearly 0.5 percent since Friday to $89.59, which has weighed on crude prices.
“After six weeks of losses balance is inevitable. Its influence has really resurged as of late to where the dollar index below $90 has propped up oil,” said John Kilduff, partner at Again Capital LLC in New York.
Crude prices also had drawn support from a large premium in the front-month Brent oil contract over those for future delivery, as investment in crude futures and options reached a new record high last week.
Oil consumption is surging as a result of growth in major economies, while OPEC and its allies have made repeated commitments to limiting their crude output.
On Monday, Iraq’s oil minister said in London that the oil market was improving, and that the country would comply with OPEC output cuts even though it is trying to increase its oil export capacity.
Somewhat offsetting the OPEC-led cuts has been rising oil output in North America.
“We believe that today’s oil prices project a too rosy picture,” said Julius Baer’s head of macro and commodity research Norbert Ruecker.
U.S. output has jumped more than 17 percent since mid-2016, reaching 9.88 million barrels per day (bpd) in mid-January. It is expected to exceed 10 million bpd soon.
U.S. energy firms added 12 drilling rigs for new production in the week to Jan. 26, taking the total to 759, Baker Hughes reported on Friday.
U.S. production is now on par with top exporter and OPEC kingpin Saudi Arabia. Only Russia produces more, averaging 10.98 million bpd in 2017.